oversight

Navy Ships: Status of Strategic Homeporting Program

Published by the Government Accountability Office on 1990-04-24.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                    United States General Accounting     Office
                    Testimony
GAO


For Release         NAVY SHIPS:         Status   of Strategic     Homeporting
on Delivery         Program
Expected at
9:30 a.m. EST
Tuesday,
April   24, 1990




                    Statement    of
                    Martin M Ferber,         Director
                    National    Security      and International      Affairs
                       Division
                    Before the
                    Subcommittee   on Seapower and Strategic              and
                      Critical   Materials     and
                    Subcommittee   on Military     Installations          and
                      Facilities
                    Committee on Armed Services
                    House of Representatives




                        cJ?J-ie)w          ILfilXd
GAO-T-NSIAD-90-37
                                    /                                   GAO Form 160 (12/W)
Mr. Chairman,              Madam Chairwoman,                 and Members of                  the Subcommittees:


I am pleased           to be here           today         to discuss            our    recently           initiated
work     regarding          the current            status         of     the Navy's           strategic
homeporting           program       and the          potential             impact       of the        Navy's
changing       force        structure.             Although            we are just            starting          our
detailed       analysis,          I would          like      to discuss              our past         findings              which
we believe           are still          valid       today,        and the           status      of    funding          and
development           of    the   new homeports.


Our current           analysis          is a follow-up                  to our        1986 report           (Navy Ships:
Information           on the Benefits                and Costs             of Establishing                New
Homeports,           NSIAD-86-146,              June 3, 1986)                which      addressed           the costs
and benefits            of establishing                   new homeports.                In that          report         we
stated       that     the      Navy needed           to more clearly                   demonstrate            the
strategic           benefits       of new homeports                     and that        the     total       budgetary
impact       of the homeporting                    plan     was not          clear.          Now that           the
Department           of Defense           (DOD) budget                 is slated        for     significant
reductions           during       the     1990's          and the number of                   ships      in the         fleet
are projected               to decline,            we believe             today's       hearing          on the
continued           need for       new homeporting                     facilities            is extremely              timely.


RESULTS IN BRIEF


 In summary,           we believe           that      before           the Navy proceeds                 with         the
 strategic          homeporting           program,           it    must       (1)     reconsider           the need for
 the program           in light          of changing              world       events         and budget           cutbacks,
and (2)        analyze          the      total         cost        of the          program,        which       will      exceed           $1
billion,            and consider              alternatives.


The Navy justifies                     expansion              of     its      homeports            on the basis           of        1982
analysis.             We questioned                   this      analysis             in our 1986 report,                  and we
believe        it     is even more important                               to revisit           that      analysis        now
because        of     the      changing           worldwide                threat,          declines       in the        size        of
the Navy,            and budgetary                pressures.                  The Navy is no longer                      planning
a 600-ship            fleet:         the       current          fleet         is     less      than     550 ships         and
further        reductions              are       likely.


The new homeports                     will       cost        at least          $1 billion              when all         sources           of
funds       and all          costs       are considered.                       While         the      Congress         has capped
appropriations                 for      the program                 at $799 million,                   funds      available
from       the Base Closure                    Account             and from          state      and local             governments,
will       greatly          increase           the      total         investment              in the program.                  In
addition,            there      will          be other             costs      for     housing,          quality         of life
needs       and mission               enhancements.                      Alternatives              such as improving
current        homeports              could       be cheaper                 and     just      as effective.


 I would       now like              to discuss               these        issues.


 JUSTIFICATION               FOR HOMEPORT EXPANSION SHOULD BE REVISITED


 The first           area      that          I will          address         is the         strategic          principles
 that      the Navy used to develop                                the     homeporting             plan     in 1982 and

                                                                      2
which       it        says     still          apply        today.        In 1982,          the Navy was concerned
about      how to accommodate                          more ships           coming         into     the     fleet      as it
built       to 600 ships.                       What evolved             was a plan           adjusting             the mix of
ships       in existing                     ports     and establishing                several         new ports             based on
strategic              principles               related         to   (1)     battlegroup            integrity,              (2)
force       dispersal,                  (3)     industrial           base utilization,                    (4) logistics
suitability,                  and (5)           geographical             considerations.                  We     reported           in
1986 that              the     Navy did              not     do a definitive               analysis         of how the
benefits              envisioned               in applying           these      strategic           principles              would
be achieved               and that              the degree           that     the     Navy would             realize
anticipated                  benefits           was not         clear,


At that           time        the       Navy commented               that     the     use of modeling
techniques               to quantify                 the benefits            of strategic             homeporting
probably              was not           practical.              We agreed,           but     what we believed                     was
needed           was much more straightforward.                                     In assessing             potential
sites       for        the      new homeports,                  the Navy analyzed                  how each site
scored           in    terms           of     such factors           as operational                considerations,
land,       community                  support,            and environmental                issues.          We believed
the Navy should                        have also            performed        a similar            analysis          to assess
the extent               to which              these        principles        could         be realized             at existing
homeports               in comparison                  to the new homeport                   sites.          Today,         before
additional               monies             are spent          on homeports,               we believe          an analysis               of
all
-       homeports               should              be done because            the    projected            fleet       is
different               than        what was planned                  in 1982 when the current                         homeports
were justified.

                                                                     3
The Navy's        experience            in 1973,         when it            consolidated           homeports            for
reasons       of economy,          may provide            some lessons.                  At that         time,         with
the     number of active               ships     being         reduced         from     917 to 523,           the Navy
had more homeports                than     needed        for     dispersal             and operational
requirements.             Senior        Navy officials                testified           before        Congress          that
due to drastic            reductions            in the         size    of      the     fleet      the     related
shore       establishment          had to be brought                    in line.           This     "historical"
rationale        may again         be valid           because         of     the      reduced      force
structure.


Navy Has Not Yet Assessed                       the     Impact        of a Smaller
Fleet       on Its      Infrastructure


Because        of expected          significant            force           reductions          the Navy,          in
February        1990,      initiated           a review         of possible              infrastructure
changes        throughout          the Navy.            The report,             due in August               1990,        will
define       a "Navy       shore       establishment              capable            of supporting           given
force       levels,      force      mix,       and missions                through       the next         decade".
Navy officials             told     us that           the new homeports                  are    included          in this
study.         We believe          the expenditure                of additional                funds      on new
homeports         should      be curtailed              until         the     Navy decides              exactly         what
it    needs.


One objective            of the        strategic         homeporting                 program       was to
accommodate           about       600 ships,           including             15 carrier         battlegroups                  and
4 battleship            battlegroups.                 Today,      the Navy has 546 ships,

                                                            4
including           14 carrier         battlegroups                and it      plans          to retain         two of          its
four     battleships.                Further      expansion            of the         fleet       is not
anticipated.                In fact,          some downsizing                is possible.             For example,
there      is much debate              on the number of operational                              carriers          the         Navy
needs.          Two of the new homeports                       are     slated          to get      carriers.


Although         Navy officials                have provided                us with      the      type     of ships             to
be assigned            at the        new homeports,                the Navy has not                announced             where
the     ships       designated          for     the new homeports                  are currently                located
and which           ships     will      remain        at existing             ports.           We are told           this
information            is not        available         because         it     is     under      consideration                  as
part     of     the     infrastructure               study.         The possibility                that      existing
ports       could      continue         to accommodate                the     ships      under       a reduced             force
structure           should      be evaluated             before        the new homeports                    are
activated.


The Navy has provided                      us data        that       shows how many ships                    were         in
each homeport               at the      end of        fiscal         year     1989,       how many would                  be in
each homeport               when the new homeports                     are opened,               and what          the
projection            was when the plans                  were for           a 600-ship           Navy.         On the
one hand,             the data       show that           some existing               homeports           had more ships
than     planned         under       the      new homeporting                plans      or under          the      600-ship
Navy plan.              On the other             hand,        some homeports              have fewer              ships        than
they     would         have had under             a 600-ship           Navy even with                the     new
homeports.              Such data          further        supports           the need for            a new homeport-
by-homeport             analysis.

                                                               5
Navy Believes                    New Homeports                 Are Required               Due      to

Physical           Characteristics                      of     the New Ships


While        not     a part              of     the original             justifications,                   Navy officials
tell      us that            the new homeports                         are needed          because             the new guided
missile        destroyers                     and cruisers              are physically                  larger         and have
higher        electrical                  demands than                 the older          ships         that       they     replace.
For example,                 the Navy says                    a DDG-51 Arleigh                   Burke         class      destroyer
needs        4,500      amps of electrical                             power     versus          2,300          amps for           a DDG-37
Coontz        class          destroyer              that        it     replaces.           The DDG-51 also                    has
greater        draft             and beam.


While        such additional                       requirements                may be valid,               the capabilities
of existing                 ports             to accommodate              the newer             ships      still          need to be
analyzed.              If         they         cannot        currently          accommodate               the newer           ships              the
feasibility                 of     improving            them should              be determined.


TOTAL COSTS OF NAVY'S STRATEGIC HOMEPORTING
PROGRAMSTILL                      UNKNOWN


The second             major             area      I will            discuss       is    the      homeporting              program's
costs.             Overall,              the Navy still                  has not         determined              the      total           cost
of     the     strategic                 homeporting                 program.           Public          Law 99-591,               title          I
of Military                 Construction,                    section         123 provided                that      for     military
construction                     for     the      strategic            homeporting               initiative,              no more than
 $799 million                    shall         be appropriated                 or obligated               through          fiscal           year

                                                                         6
1991.         The Navy is using                 these       funds       to achieve             initial       operating
capability.               However,      additional            sources           of     funds       including      some
non-federal              funds,     which       are not       subject           to this         spending        cap,
bring      the        total   costs     of the          new homeports                 to well       over     one billion
dollars.


Initial        Operating           Capability           Costs


Under      the        "capped"      appropriations                for     the        homeporting           program,
about      $625 million             has been appropriated,                           and an additional             $25.7
million          is     included      in the       fiscal         year      1991 budget              request.          As
shown in Table                1 as of March             1990,       about       78 percent               of the money
had been obligated                  and 61 percent                of     the obligations                  had been
spent.




                                                              7
Table 1:      Status    of Initial      Operating Capability                   (KC) Costs
                           (dollars     in millions)

                                              Appropriations                  Budget request            Obligations        Expenditures
                       November 1985           fiscal years                    fiscal year                 as of              as of
Homeport                IOCEstimate            1986 to 1990                        1991                 March 1990          March 1990
Staten Island              $188.0                   $188.8a                        $      0                  $149.6             $133.3
Everett                     272.0                    191.3                             22.2                   179.8              104.2
Gulf Coast
  Ingleside                     85.0                  92.7                                                     60.8                 38.5
  Pascagoula                    57.0                  47.5                                                     25.8                  3.1
  Mobile                        33.0                  37.3                                                     25.9                  9.8
  Pensacola                     25.0                  41.8                                                     27.5                  9.8
  Galveston                     34.0                  ls.&                                                     13.3                       C
  Lake Charles                  20.0                  10.3b                                                     5.3                       C

West Coast
 Hunters Point/                 67.0                          0b                          0                       0                       0
 Treasure Island
 Long Beach                     12.0                                                    3.5
 Pearl Harbor                    6.0                                                      0
Total                                                                              $2Lz

aIn addition         to appropriations of $188.8 million, the Navy has reprogrammed $4.5 million                                              for
construction         of a Shore Intermediate Maintenance Activity facility.
bThese homepzzts are no longer in the program. Of the appropriated amounts shown for Lake
Charles and Galveston, $17.1 million has been reprogrammed to fund initial Base Realignment
and Closure planning requirements.
'Actual costs will not be determined until contract termination negotiations                                             are completed.
These costs are currently estimated to be between $11 and $12 million.

        The      Navy     believes       that        since         five       of   the     new homeports--Staten
           Island,       Pensacola,           Mobile,          Pascagoula,              and Ingleside--have              been
           funded       100 percent           for    initial          operating            capability          and Everett          has
           been funded           70 percent,            it     would      be abandoning             a substantial
           investment           in military          construction.                     Recently,        it   estimated       that
           the costs       of     terminating                the   new strategic               homeports        would     be $261
           million       plus     $375 million                in sunk costs.                  In addition        they     would

                                                                          8
have to expend            more funding            to upgrade          exis ting       po rts     to

accommodate         new ships.


However,        the Navy has not               compared        the additional            costs        of
continuing         development           of    the new homeports               with     the costs             of
accommodating           the     ships     at     the    existing       homeports.              Furthermore,
there     may be alternative                  uses or other           means of recouping                    some of
the     funds    already        spent.


Base Closure          and State          and Local         Funds


In addition          to funds       to achieve           initial       operating          capability,
about     $174 million           of Base Closure               Account      funds       are being             spent        at
the new homeports               and about         $199 million           has been contributed                        by
state     and local        governments.                Table       2 shows the        total      of        initial
operating         capability,           base closure,              and state      and local           funds          for
each of         the six       new homeports            (the    Base Closure           Commission              and its
impact       on the homeports                 is discussed          on page 15).




                                                         9
Table 2:       Summaryof IOC, Base Closure, and State and Local Contribution                                             Funds
                                    (dollars in millions)

                             IOC appropriations,                            Base                    State and
                             requests,   and                               Closure                      Local
  Homepo rt                  reprogrammings                                 Funds                 Contributions                       Total
  Staten Island                          $193.3                                $53.6                     $29.0                   $275.0
  Everett                                 213.5                                 90.0                       9.5                    313.0
  Gulf Coast
     Ingleside                              92.7                                30.0                          60.0                    182.7
     Pascagoula                             47.5                                    0                         50.0                     97.5
     Mobile                                 37.3                                     0                        37.0                     74.3
     Pensacola                              41.8                                     u                        13.2                     55.0
  Total                                                                     $173.6                      $198.7                    $998.4

  Additional        Costs         Will      Be Incurred
  To Provide        For Full             Development


  Available        funding         will          provide         for     the homeports'                initial          operating
  capability,         but        not      for     additional             facilities            that     we believe           are
  necessary        for      the     ultimate             development            of     the ports.                These
  facilities        will         have to compete                  for     funding         with        other       Navy
  construction            projects              beginning          in fiscal           year      1992.           Examples        of
  facilities         not     covered             in    initial          operating         capability              costs
   include       nonappropriated                   fund      requirements,               military          family
  hous ing,       and projects                  the    Navy considers                 desirable          for      ultimate
  port       development          but      not        critical          to initial            operating           capability.


   Information           available              on the       new homeports               at Staten             Island      and
   Everett       demonstrate              the numerous                 costs     associated            with       the
   homeporting           plan.


                                                                  10
Staten         Island,          New York


The Navy selected                    and designed                 Staten       Island      as the homeport                       for     a
battleship               surface         group,         consi sting          of the U.S.S.               Iowa,          a
battleship,               one guided             missile          cruiser,        and three           destroyers.
However,           the Navy now plans                      on deactivating                the U.S.S.             Iowa           in
fiscal         year       1991.


Berthing           facilities             at Staten              Island       are close          to completion.                        For
example,           the pier          and dredging                 are complete            and the         Shore
Intermediate                Maintenance               Activity            is to begin           operating           in June
1990.          The first            ship,         the     U.S.S.         Normandy,        a guided            missile

cruiser,           is     to arrive              in August          1990.        In our         1986 report                 we stated
that       the Navy's              estimates             for     Staten       Island      did      not    include               a (1)
headquarters                building,             (2) construction                  battalion         unit        facility,
and (3)          public         works        facility.              These projects,                in our opinion,
were essential                  to basic             operations.              However,          the Navy terms                   these
items       "enhancementsn                   and it            considers        them desirable                at these               ports
but      not     critical           to     initial             operating       capability.               These
"enhancementsl                     were estimated                  to cost       about       $14 million.


The Staten               Island       initial            operating           capability          program          also
excluded            $21.7       million           for     outdoor          recreation           facilities,                 a
physical            fitness         center,             and other          morale       and welfare             projects.                    It
seemed          likely        to    us      in 1986 and now that                       the Navy would               give             these
 items         funding        pr iori       ty    in future           budgets          as the      absence          of such

                                                                    11
morale      boosting               items       would          tend          to detract               from efforts             to improve
morale      and increase                    retention.                 We noted               that     the      Secretary             of       the
Navy's      fiscal           year          1986 report                to       the     Congress            on the military
posture       of      the     Navy and Marine                         Corps cited                the       restoration              of
morale      as one of               the elements                    that        has contributed                      to Navy
advancements              over        the       last        5 years.


The Navy has spent                         $133.3          million             of     the     $188.8         million
appropriated                for      initial              operating             capability              at Staten            Island
during       fiscal          years          1986 through                    1990.            An additional                 $4.5     million
was reprogrammed                     for       the        Shore       Intermediate                   Maintenance             Activity
facility.             In addition                 to the             initial           operating             capability              funds,
local       and state              contributions                    amount            to $29 million,                   appropriations
for     400 units            of      family           housing              total       $40.4         million          and monies                for
nonappropriated                    fund        activities                  total       $17.5.           The Navy has
requested           $19.6          million            for     an additional                     150 units             of    family
housing        in the             fiscal        year         1991 budget.                     Also,         the Navy has awarded
contracts           for      another            1,200          housing               units      under        a build-to-lease
program       but         construction                    has not           started           yet.


Everett,           Washington


Because        of delays               in litigation                       over       environmental                  concerns            Everett
 is the      least          developed                of     the new homeports.                             Shoreline,             utilities,
 and site          improvements                  are        about          the only            construction                contracts
 nea r completion.                     Dredging              and construction                        for       the     carrier           pier         is

                                                                        12
about      20 percent             complete.                 The first                 ships,         which    will        include           the
U.S.S.      Nimitz,          a nuclear               aircraft              carrier,            are not        scheduled              to
arrive      until         summer 1992.


The Navy has spent                   $104.2            million             of        the $191.3           million
appropriated              during         fiscal            years         1986 through                 1990 for          initial
operating           capability.                 It     has requested                      another         $22.2       million          for
initial      operating             capability                   in the           fiscal        year       1991 budget.                Thus,
appropriated              and requested                    initial           operating               capability           funds        total
$213.5      million.              According                to the          Navy,          an additional                $59 million
will      be needed          to meet            initial              operating              capability,              making          the
total      amount         $272.5         million.                This           is    the      same amount             as the         Navy
estimate          for     Everett          in 1985.                  In addition,                 local       and state
contributions              amount          to $9.5              million,


In our      1986 report,                 we stated                that          the     largest         single         project
excluded          from      the     $272 million                     estimate             was a central                wharf,
costing       $40 million,                 which           would         be needed              to help        berth           the    13
ships      that         are to be homeported                          there.              The Navy's           own 1985 cost
study      also         stated      that        all        13 ships              could         not     be homeported                 without
this      wharf.          We believed                 the       exclusion              of this          wharf,         along         with
other      projects,              from     the        initial            operating              capability             estimate
understated              the cost          of        the     new homeport.


The costs           of a barge             facility,                 training               complex,         radar       collimation
tower,       telecommunication                        center,            and medical/dental                         facility          were

                                                                      13
also       excluded.           These projects,                    which        we believed           were critical                      to
basic       operations,               were      included          in the enhanced                  program            at a cost
of $18.6         million.              No    community/personnel                       support       cost         was included
in the         Navy's       initial          operating            capability             estimate.


In     1986,     because          this        homeport          was planned              to house          13 ships--the
largest         number of ships                   at a new homeport--the                          Navy planned                to
construct          a $13.7            million           Shore      Intermediate              Maintenance                Activity
facility         at Everett.                  However,           the     Navy's         current       plans           are
unclear.           There        is no Shore               Intermediate                Maintenance            Activity
facility         shown in the                 initial        operating               capability           for     Everett;
but,       in March         1990 testimony                  before         the Seapower              Subcommittee,
House Committee                 on Armed Services,                       the    Navy Director                   for     Ships
Maintenance             and Modernization                       stated        that      Shore      Intermediate
Maintenance             Activity             facilities            would       be built           at Everett              and four
other       new homeport                locations.


Annual         Operating           Costs


Obviously,           annual           operating            costs        for    homeports           will         exist         wherever
ships        are located.                   However,        a comparison                of   the     total            costs        of    the
strategic          homeporting                  plan      should        also     include          the operating                    costs
of the         new ports           versus         the      incremental               costs    of keeping                the        ships
at existing             ports.




                                                                   14
In 1984,          the Navy did           an analysis              that         showed establishing                  new
homeports          would      increase         operating             costs       by $35 to $50 million                     a
year.       However,          with      the declining                  force     structure,         the         incremental
costs      at existing          ports         also       may have declined,                    making      the
comparative          costs       of     the     new ports              even greater.              Thus,         a new
comparison          of annual           operating           costs         is needed        for     the decision-
making      process.


BASE REALIGNMENT AND CLOSURE COMMISSION'S RECOMMENDATIONS
IMPACT       ON    SOME HOMEPORTS


You also          asked me to discuss                    the      impact        of   the Base Relocation                     and
Closure       Commission's              recommendations                   on homeport            plans.           The
recommendations               affected           six     new homeports                included         in the
original          strategic           homeporting            program.             As a result           of the
recommendations               construction               of new homeports                 at Hunters              Point,
California;           Galveston,              Texas;       and Lake Charles,                   Louisiana,            was
stopped       or never          started.


Ships      designated           for     Hunters           Point        will      be relocated             to Pearl
Harbor,       Hawaii;          San Diego,              California;             and Long Beach,              California,
Ships      designated           for     homeporting               at Galveston            and Lake Charles                   will
be relocated            to the         new homeport               at     Ingleside,           Texas.        All      units
 and activities               located         at the Brooklyn                  Naval     Station          are     to be
 relocated          to Staten          Island,          and functions                located       at the         Sand



                                                               15
Point        Naval    Station        which         serves          fleet        units        at Everett,             and the
Navy exchange,              are to be relocated                         to Everett.


Since        implementation           of     the Commission's                         recommendations                is not      a
part      of the       strategic        homeporting                    program,          funds      appropriated           from
the      Base Closure           Fund Account               are not             part     of    the congressional
cap of $799 million.                    We found                that         base closure           projects           at the
new homeports             currently          are estimated                     to cost        $173.6        million:
--     $53.6    million         at Staten           Island             for     bachelor          enlisted        quarters,           a
       Navy Exchange,              a fitness         center,                 and other        projects.              Most of
       these     projects          support         the     administrative                    functions         transferred
       to Staten        Island        from Brooklyn.                         Even if      no ships          are homeported
       at Staten        Island,        the     administrative                     functions          may remain           there.
--     $30 million          at Ingleside                 for     a pier/wharf                extension,
       intermediate          maintenance/warehouse                             additions,           utilities/site
        improvements,           and        a child             care     center.
--     $90 million          at Everett             for         a logistics              complex,       fleet         support
       headquarters          building,             port         services          addition,           and other
       projects.




 In summary,           we believe            the     basis            on which          the new homeports                 were
 justified           in 1982 should            be revisited                     in today's          environment            of
 tight       defense       budgets         and changing                  threats.            The costs          of
constructing              and operating              the        new homeports                will     exceed         $1

                                                                 16
billion,        while         the costs        of     not     proceeding        with     the homeports             has
been estimated                by the     Navy at $636 million.                       However,       some of        these
sunk costs           may be recoverable                     through      alternate        uses of the
facilities           built.


Before        further         monies     are        spent     on the homeports,             the     total     costs
of   the     new homeports              should        be estimated            and a comparison              made to
the costs         of keeping            the    ships         at existing        ports      and/or      improving
existing        port      facilities           to handle              newer   ships.        Also,      any
additional           costs       necessary           to fund          the Base Realignment             and Closure
Commission's             recommendations               must be taken             into     account      as well        as
where        these      functions         could       best      be located.             In essence,         what     is
needed        Ear sound decision-making                         is a port-by-port            analysis         with
alternatives             costed        out.


Mr. Chairman,                 Madam Chairwoman,                that     concludes        my prepared         remarks.
I will        be happy          to respond           to any questions.




                                                              17